Initiation of CIRP against the SDIL vide order date 16th July, 2019 by the NCLT. To know more join the owner's discussion group by clicking the Telegram logo Image

Home buyers will be treated as financial creditors,which means they will be on par with banks.

Anything related to Real Estate- Deals, New Projects, News etc....
Admin
Site Admin
Posts: 109
Joined: Tue Sep 02, 2014 1:07 am

Home buyers will be treated as financial creditors,which means they will be on par with banks.

Unread postby Admin » Fri Aug 10, 2018 9:13 am

In a big step to protect home-buyers, changes to the Insolvency and Bankruptcy Code (IBC) will come into force with President Ram Nath Kovind signing off on the government's ordinance or special order. The Insolvency and Bankruptcy Code (Amendment) Ordinance aims at saving the buyers when builders declare bankruptcy in the middle of a real estate project. Earlier, this used to leave hundreds of thousands of home buyers without any means to recover the money they invested. With this, the situation like Jaypee Infratech is unlikely to arise where the home buyers had to file a petition In the Supreme Court for restraining the sale of assets. When a company is bankrupt, financial creditors (banks) have the first right over the proceeds of assets. Now, when the buyers are also treated like financial creditors, they would also stake a claim in the assets' sale as well as in the bankruptcy proceedings.

Ten Points on the insolvency and bankruptcy law


1. Home buyers will be treated as financial creditors, which means they will be on par with banks. Before the new rules, buyers could hope to recover their money only if anything was left after secured and operational creditors were compensated.

2. As financial creditors, home buyers will now be able to participate in the decision-making process when developers are declared bankrupt under the bankruptcy law - IBC (Insolvency and Bankruptcy Code, 2016).

3. As the home buyers are treated on par with the financial creditors, they will also be allowed to file application seeking insolvency of the developers. The amendment will also give them due representation in the Committee of Creditors (CoC) and make them an integral part of the decision-making process of insolvency, which is known as corporate insolvency bankruptcy process of IBC.

4. The amendment of involving home buyers in the process was mooted on the suggestions of a 14-member government insolvency law committee which was formed in November last year for resolving the issues that were arising in the implementation of insolvency and bankruptcy law.

5. With realty firms, such as Jaypee Infratech, facing insolvency proceedings, the ordinance is set to provide relief to the home buyers who face immense hardships because of incomplete real estate projects. Sometimes these buyers have to wait for years to get the possession of their flats for which they have already made the payment. And if they want their money back, they barely have an alternative.

6. Apart from the home buyers, another major beneficiary after the IBC amendment would be Micro, Small and Medium Enterprises (MSME) sector as the sector would get a special relief. As applicable in other sectors, the promoter of MSME will not be disqualified to bid for their own enterprise (undergoing the insolvency resolution process) as long as they are not the the wilful defaulters.

7. The amendment encourages resolution instead of liquidation for which, the voting threshold for approval has been reduced to 66 per cent from 75 per cent for all major decisions that are taken during the proceedings of insolvency. This means that for several decisions such as approval of resolution plan and extension of insolvency resolution process period, fewer members' approval is necessary, as the ordinance comes into effect.

8. The IBC was amended in January this year also to prevent wilful defaulters from bidding for the stressed assets. Even the defaulters whose accounts have been classified as non-performing assets were also barred from bidding.

9. The first bankruptcy resolution that was materialised under the IBC law was that of Bhushan Steel wherein settlements of the amounts equivalent to Rs. 35,200 crore towards financial creditors were made last month.

10. The insolvency and bankruptcy code (IBC), which came into force in December 2016, allows for the time-bound insolvency resolution process.

Insolvency and Bankrutpcy Code, 2016 (31 of 2016)_2018-06-08 20_06_32.pdf
The Insolvency and Bankruptcy Code, 2016 (Upto date)
(991.97 KiB) Downloaded 28 times
Insolvency and Bankrutpcy Code, 2016 (31 of 2016)_2018-06-08 20_06_32.pdf
The Insolvency and Bankruptcy Code, 2016 (Upto date)
(991.97 KiB) Downloaded 28 times

Return to “Real Estate News”

Who is online

Users browsing this forum: No registered users and 0 guests

unnathi.in : Disclaimer